First leasing case: HC declines A C Muthiah's plea

The Madras High Court has refused to quash proceedings against industrialist A C Muthiah pending in an economic offences court here over filing of alleged distorted financial statements by the city-based First Leasing Financial Company of India of which he was a director.
Dismissing a petition by Muthiah, Justice P N Prakash yesterday held there were sufficient materials to proceed against him and rejected his contention that he cannot be vicariously held liable for the company's alleged offences.
Following an inspection in 2013, the Reserve Bank of India filed a complaint for prosecution of the company and its directors for publishing financial statements for 2010, 2011, 2012 and 2013 allegedly containing false particulars and statements in order to make it look as if the firm was financially sound, on the strength of which huge loans were borrowed from various financial institutions.

Muthiah, who had resigned as director of the company in 2013, had sought to quash further proceedings on the file of Additional Chief Metropolitan Magistrate/Economic Offences Court (EOW) II.
The judge disagreed with the petitioner's contention that the April 14, 2014 order of the EOW taking cognisance of the offence did not satisfy the test laid down by Supreme Court.
He said the fact remained that Muthiah was the director of the company until his alleged resignation on November 1, 2013.

There was a clear assertion in the complaint that the Board of Directors knew full well about the malpractices in accounting and in the teeth of this assertion, it cannot be held otherwise in a proceedings under section 482 of CrPC (power of high courts to quash proceedings), the judge said.

He also noted that according to the prosecution the distorted annual reports were signed by Farouk Irani, a co-accused, and Muthiah.
"... There are sufficient materials in the complaint for the prosecution to proceed as against A C Muthiah and his plea that he cannot be vicariously held liable for the alleged offences committed by A1 company stands rejected," he held.